America had four currency failures before 1900

It seems odd people who sell dollars, rarely know where they came from. So sometime, if you want to stump a banker, a life insurance agent, a stock broker or a financial planner, ask, “How many currency failures have we had in America?”

In 1690, Massachusetts was the first colony to issue fiat money. More than 30 years prior to John Law destroying France with paper money, colonists were already doing it. Eventually, all 13 colonies issued paper money. In 1751, the British Parliament passed an act forbidding the colonies to issue any more fiat money. It wasn’t working and the English parent thought they had to intervene. This period of colonial currencies (each colony issuing its own money) was America’s first currency failure.

So, when George Washington was put in charge of the Continental Army, it wasn’t a new idea to pay for the war costs through money printing. If you are old enough, you may have been taught, in school, this part of history. Even today, the phrase, “Not worth a Continental” is sometimes used. In the spring of 1780, the Continental bill was worth two cents on the dollar. After that, they became worthless. “A barber’s shop in Philadelphia was papered with it, and a dog, coated with tar, and the bills stuck all over him, was paraded in the streets.” [Pages 46-47] This was our second money failure.

Sometimes, I talk with people of faith who think the U.S. dollar won’t collapse or end, like the 609 currencies, which have [1], because, “God wouldn’t let that happen.” Let’s pause on that thought. When the Continental dollar became worthless, there were very devoted Christ followers and religious people who saw their wealth evaporate. God was not a “respecter of persons.” The same would be true in the colonial days and in the Wildcat banking period of 1837-1863.

In the “Free Banking Era,” also called the Wildcat banking period, banks in the Northeast and Midwest created an estimated 10,000 different banknotes, which were used as money. Although these notes all failed or were replaced, I’m not counting it as one of our four currency flops. Yet, people holding a worthless bank note wouldn’t have cared about the distinction. It was just as painful, to them.

The Confederate dollar was created in 1861. The next year, the Greenback was the North’s paper money. By the spring of 1865, the Confederate dollar was worthless and the Greenback was worth 50 cents on the dollar. It’s hard to believe now, but in 1865, California led the nation with sound money. When President Lincoln introduced the Greenback and made it legal tender, declaring it as valuable as gold or silver, the Golden State rejected the fiat money. The California Supreme Court ruled contracts requiring payment in gold coins could not be fulfilled by Greenbacks. In every other state, Greenbacks replaced gold coins. [2] At that time, California distinguished itself by staying on a “gold standard.” Later, Oregon also favored hard money over the Greenback. California and Oregon were right.

By 1879, the last of the Greenbacks were retired and the fourth currency had finally failed, but this time, with a gold-trade-in value. For money, this was the beginning the glory days. From 1879 to 1933, gold was the basis for our money. During this time period, paper bills were redeemable, at the bank, for gold. Eventually, some bills were redeemable in silver coins. It wasn’t the first time in American banking history, but during this time period, part of a bank audit included how much gold they had in the vault and could they reasonably fulfill the request of customers who wanted to trade their paper for precious metals. Dollars, at that time, were seen as a paper receipt for the metals stored at the bank.

In 1874, American historian William Graham Sumner wrote:

“There is nothing new to be discovered about the operation of paper money. There is no new invention possible for making it ‘as good as gold,’ no new device conceivable for making it elastic…Each new issue will produce, only for a time, ease and apparent prosperity, to be followed in a few years by a new crisis and new distress, then a new issue, and so on over again. Reform will then be no longer possible, and we must run the course to its end, in which the paper disappears as ignominiously as the Continental notes.” [3, back cover]

Today’s gods of money think they are smarter than past money lords. “This time, we can make fiat money work.” If you think permanent wealth can be created by printing money, then you don’t need precious metals. If, on the other hand, you think printing money doesn’t create wealth, then you might want to trade some of that fiat money for real money.

“Dollar” Bill is a real guy, with real knowledge on our nation’s financial calamity, and real solutions for what must be done to dig ourselves out of the hole we are in. Due to his career, Bill must remain “disguised” to protect his position. “Bill” loves America, sees the impending cliff we are all headed towards, and hopes that by sharing his inside knowledge of the failed monetary policy in our nation, that a fiscal “nuclear” event can be averted.